Black Hills Earnings Call Highlights Growth Amid Headwinds

Black Hills ((BKH)) has held its Q1 earnings call. Read on for the main highlights of the call.

Black Hills’ latest earnings call struck a cautiously upbeat tone, as management balanced solid operational execution and reaffirmed guidance with clear acknowledgment of weather-driven headwinds and rising costs. Executives stressed resilience in the face of an unusually warm winter, while pointing to a robust project pipeline and a pending merger as key pillars of the company’s long-term growth story.

Profitability Under Pressure but Within Expectations

Black Hills reported GAAP EPS of $1.73 for Q1 2026, including $0.05 per share of merger-related costs, and adjusted EPS of $1.79 versus $1.87 a year earlier. The roughly 4.3% year-over-year decline reflected weather, financing and depreciation pressures, but remained broadly aligned with management’s full-year expectations.

Guidance Reaffirmed and Growth Framework Intact

Management reaffirmed 2026 adjusted EPS guidance of $4.25 to $4.45, implying about 6% growth at the midpoint compared with 2025. The company reiterated its long-term 4% to 6% growth target and expressed confidence in delivering toward the upper half of that range, underpinned by new projects and regulatory recovery.

Expanding Large-Load and Data Center Opportunity Set

A centerpiece of the call was Black Hills’ growing pipeline of more than 3 gigawatts of large-load prospects, heavily weighted to data center demand. The plan already incorporates 600 megawatts by 2030, while another 2.5 gigawatts-plus of opportunities remain under negotiation, including a flagship 1.8 gigawatt project near Cheyenne.

Customer-Funded Reservations Bolster Project Optionality

To advance the 1.8 gigawatt opportunity, Black Hills executed a short-term generation reservation agreement with the prospective customer. The customer has already provided $201 million of refundable construction contributions, enabling the company to secure long-lead equipment while limiting balance-sheet risk if the project does not proceed.

Capital Plan Anchored by Generation, Transmission and Storage

The utility outlined a five-year capital plan totaling $4.7 billion, focused on regulated generation, wires and storage. Key projects include the 99 megawatt Lange II generation facility slated for fourth-quarter in-service, the $350 million Ready Wyoming transmission line now in service, and a 50 megawatt Colorado battery project targeted for late 2027.

Rate Recovery Supports Margins Amid Cost Pressures

New rates and riders contributed $0.24 per share of margin in the first quarter, providing a meaningful offset to weather and cost headwinds. These increases, tied to projects like Ready Wyoming, underscore the importance of timely regulatory recovery to sustain earnings growth and fund infrastructure expansion.

O&M Discipline Helps Offset Macro Headwinds

Operating and maintenance expenses, excluding merger costs, improved by $0.10 per share year over year in the quarter. The savings were split between $0.04 per share from lower employee-related costs and $0.06 from other O&M reductions, reflecting ongoing cost-control initiatives across the utility footprint.

Liquidity and Capital Markets Access Remain Solid

Black Hills ended the quarter with roughly $500 million of availability on its revolving credit facility, reinforcing ample liquidity. The company also issued $41 million of equity through its at-the-market program, positioning itself for a modest remaining equity requirement in 2026 and supporting its credit profile.

Reduced 2026 Equity Needs Ease Dilution Concerns

Management now expects total equity needs in 2026 to fall between $50 million and $70 million, notably lower than prior expectations. The improvement stems from stronger projected cash flows and new assets entering service, which collectively lessen the need for additional share issuance and potential dilution.

Merger with Northwestern Energy Advances Through Approvals

Progress on the planned merger with Northwestern Energy featured prominently, with favorable shareholder votes and expiration of key antitrust waiting periods already achieved. Management also cited settlements with major intervenors in several states and signaled an expectation of remaining regulatory approvals during the second half of 2026.

Dividend Streak Extends Black Hills’ Income Appeal

A January dividend increase extended Black Hills’ record to 56 consecutive years of dividend growth, a notable metric for income-focused investors. The company targets a payout ratio between 55% and 65%, balancing shareholder returns with the capital needs of its growing regulated asset base.

Warm Winter Weighs Heavily on Quarterly Results

Weather was a significant negative swing factor, with an exceptionally warm winter reducing demand and costing the company $0.18 per share versus the prior year. Compared with normal-weather expectations, the impact was $0.13 per share unfavorable, underscoring the earnings sensitivity of a cold-climate utility to temperature volatility.

EPS Headwinds from Financing and Depreciation

Beyond weather, financing and depreciation expenses weighed on earnings, adding $0.16 per share of pressure in the quarter. Financing costs rose by $0.10 per share, largely due to new equity issuance, while depreciation increased by $0.06 per share as major assets like the Ready Wyoming line entered service.

Merger Costs Represent Near-Term but Temporary Drag

Merger-related transaction costs of $0.05 per share reduced GAAP EPS in the quarter and are expected to remain a near-term expense. Management framed these costs as an investment in a larger combined platform that could enhance scale, efficiency and long-term earnings power once approvals are secured and integration is complete.

Conditionality Around Large-Load Deals Adds Execution Risk

Despite the substantial data center and large-load pipeline, executives stressed that key opportunities remain under negotiation and not yet locked in by long-term contracts. Additional generation and transmission investments to serve demand above the 600 megawatts embedded in the plan would be contingent on definitive agreements and regulatory approvals.

Regulatory Outcomes Remain a Critical Swing Factor

Several rate proceedings are pending, including a $50.6 million annual revenue request in South Dakota Electric and a $5.1 million filing in Wyoming. These cases, and their eventual outcomes, will influence future earnings trajectories, cost recovery timing and the economics of Black Hills’ ongoing capital program.

Refinancing Needs and Future Capital Additions Under Review

The company’s next major debt maturity is a $400 million note due in January 2027, prompting management to evaluate refinancing options later this year. Additional capital investments to serve large-load customers, beyond those in the current $4.7 billion plan, could further shape financing needs as projects advance.

Forward-Looking Guidance and Strategic Outlook

Looking ahead, Black Hills reaffirmed its 2026 EPS outlook and long-term growth algorithm, leaning on a sizeable capital plan, a growing large-load pipeline and disciplined cost control. Management emphasized maintaining credit metrics within target ranges while navigating regulatory processes, merger integration steps and potential new capital commitments linked to data center demand.

Black Hills’ earnings call painted a picture of a utility navigating near-term weather and cost challenges while remaining firmly focused on long-term growth opportunities. Investors will be watching how the company executes on its data center pipeline, secures regulatory approvals and manages financing, but for now the reaffirmed guidance and strong dividend record offer a measure of stability in a volatile market backdrop.